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Spring Cleaning Guide from Optima Properties
Now that the clocks have SPRUNG AHEAD it is a good time to think about Spring Home Maintenance. As current homeowners you need to keep your home systems and property in good condition so that the small maintenance issues do not become major and expensive repair items.
Do not read this list and become overwhelmed, it is an extensive list meant to cover basic home maintenance. Not all of these maintenance items will apply to all homes. This is a comprehensive guideline designed for homes in the South as well as Northern climates.
Spring cleaning is a way to demonstrate pride in ownership (or rentership). A home and its contents are investments; money spent on something you really love or really need (ideally both). When you take the time to clean thoroughly and properly, you can maintain and prolong the life of the item or finish for years. Further, it means you live in a cleaner and healthier home; less dust, dust mites, allergens, odors, and dirt.
Always start from the top and work your way down. Think about it like this: dust falls down (like rain or snow) so if you start at the top, you’ll never have to re-clean a surface (which is a time waster). It doesn’t make sense to clean the floors first and then dust the tabletops; you’ll just have to clean the floors again. Use gravity to your benefit and always work from top to bottom. It also helps you not miss anything!
General Spring Cleaning Tasks:
These are a list of some of the things that need to be done around the house, and spring is a great time to do them. So often we don’t remember to do them, so let this be your wake-up call!
Tests and replacements:
Test smoke alarm
Test carbon monoxide alarm
Check flashlight batteries
Check fire extinguishers
Change air filters
Check all window screens for tears and repair or replace as required
Overall Spring Cleaning Chores: 
Dust crown molding and baseboards and clean scuff marks
Dust ceiling corners
Dust/wash light fixtures and lamps
Dust ceiling fans
Wipe down doors and walls (Swiffer works great for removing all the dust)
Touch up paint
Vacuum or wash/dry clean window curtains and bedding
Wash or dust window blinds
Wash windows and screens inside and out
Dust books and bookcases
Polish wood furniture
Wipe down and vacuum furniture (clean the base and under cushions)
Condition leather furniture
Remove stains from upholstered furniture
Vacuum and wash lampshades
Deep clean hardwood, tile, linoleum, and carpet flooring
Shampoo carpet (DIY or schedule a professional)
Remove area rugs to shake out, then vacuum, then clean under them
Remove fingerprints and dirt from light switches and door handles
Clean air vents
Dust around and BEHIND mirrors, picture frames, and wall hangings
Schedule chimney sweep
Schedule termite or pest control maintenance
Spring Clean Outside:
Sweep, power wash, and/or stain deck 
Power spray siding
Touch up paint trim, wood, doors, and shutters
Oil hurricane shutters
Power wash garage door and eaves of house
Clean outside door frames
Wipe away cobwebs
Shake out entry mat
Clean grill
Clean and repair gutters
Replace broken bricks, wood, or stone
Clean outdoor light fixtures
Clean outside patio furniture
Trim trees, bushes and shrubbery
Check and repair sprinklers
Inspect roof shingles
Clean outdoor and indoor trash cans
Clean out garage and sweep
How To Buy A Second Home?
You’ve found the perfect new home for your family, but your current house hasn’t sold yet. You can’t afford to carry two mortgages, or maybe you were counting on money from your sale to help with the down payment and closing costs.
Before you let that dream home slip away, consider these strategies to help bridge the transition:
Make an offer that’s contingent on the sale of your house:
A seller may be persuaded to accept your offer with the caveat that you’ll have to sell your house before closing on theirs. You’ll strengthen your chances of getting a seller to take a chance on you if you can show that your home is priced properly and has a solid marketing strategy. Successful contingency offers depend on good communication between the real estate agents representing both sides. It’s up to you and your agent to reassure the seller that the closing won’t be delayed. Obviously, in hotter housing markets with potentially multiple bids, it can be harder to get sellers to accept such an offer.
Offer the seller a rent-back option:
One way to buy yourself extra time to complete your sale is to offer to buy the new house, then rent it back to the seller after closing. A rent-back agreement is typically for just a month or two. But this arrangement can give sellers extra time to move – or to find a new house of their own – while putting a little money in your pocket and keeping you from having to pay two mortgages at once.
Tap the equity in your current home:
If you have a high credit score and considerable equity in your house, you could free up some of the latter with a home equity line of credit. A HELOC lets you use up to 85 percent of your home’s value, less the balance remaining on your mortgage, and is fine-tuned based on your credit profile and income. Most HELOCs have a variable interest rate, so it’s in your best interest to pay off the loan as soon as your current home sells.
This strategy may let you buy a house before you sell, but it’s not a last-minute option. A HELOC requires an appraisal, income verification and a thorough credit check, so it takes time – generally 30 days or more – to qualify, says Tim Beyers, mortgage analyst with American Financing in Aurora, Colorado. If you’re thinking of going this route, make sure you run the numbers with an expert upfront, Beyers says.
To qualify for the new loan, a lender will evaluate your current mortgage payment, plus the HELOC payment and your new monthly mortgage payment, to calculate your debt-to-income ratio for the new mortgage approval, Beyers says. If your income is high enough to have a debt-to-income ratio below 40 percent with all those payments and other monthly expenses taken into account, only then should you consider a HELOC, he adds.
“Once you start dipping into your home’s equity, that changes the equation when you apply for a new mortgage,” he explains. “Taking too much out can hurt your qualification chances on a new mortgage. Don’t make an offer, then try to scramble to do the math.”
Add a HELOC to your new mortgage:
With this strategy, you break up the financing on your new home with a first mortgage for the amount you need, plus a HELOC to make up the difference in your shortfall for a downpayment, says Elise D. Leve, senior mortgage banker at Citizens Bank in New York.
Once you sell your current home, you can pay the HELOC portion off in full and end up with the single mortgage you wanted in the first place, Leve says.
Get a Bridge Loan:
A much riskier strategy is what’s called a ‘bridge’ or ‘swing’ loan. Using your existing home as collateral, you take out a bridge loan for three months to five years to use as the down payment on your new home. Once you’ve purchased your new home, you sell the old one and pay off the mortgage and the bridge loan. Such a loan is less risky in a fast appreciating market where appreciation can cover the extra payment on the old home. Even in the best market, however, swing loans can be expensive, last-ditch propositions that are fraught with caveats. Bridge loans can cost 5 to 10 percentage points more than a typical equity loan. Your home must be lien free. Excellent credit is mandatory, as are good income-to-debt ratios. It may be a better idea to get a cash-out refinance, second mortgage or equity loan to use as a bridge loan. Traditional financing is cheaper and less risky, but that could preclude you from landing another mortgage for a new home should the lender consider you stretched too thin.
Tips for Investors New to Flipping
Flipping is when real estate investors buy real estate and then resells them at a profit months down the road. Can you make money doing this? Yes.
Can you make a lot of money doing this? Yes.
But you can also lose everything you own if you make a bad decision….Absolutely!
A renovation can be an overwhelming experience with high stakes. Investors must create an overall vision for the project, gauge its financial feasibility, build a reliable team that includes a Realtor, contractors, lender, accountant, insurance agent, designer or architect, and attorney or Title Company, be highly capitalized, and hope that their assessment of the market is accurate and that the property sells quickly. The longer your cash is tied up and you are paying expenses the less profitable your investment.
Thanks to tighter lending standards you will need plenty of cash, and nerves of steel, to get into flipping. So what do you need to get started?
- First, you need an excellent credit score. Lenders have tightened their requirements for home loans, especially if you want a loan for a high-risk house flip.
- You need CASH! Use the cash for a down payment, so you don’t have to pay private mortgage insurance (PMI) on your second mortgage. You could also take out a home equity line of credit (HELOC), if you qualify. If you have enough in savings, and you manage to find a bargain-priced property, you can buy the property for cash, and take out a small loan or line of credit to pay for the renovations, Realtor fees, and closing costs.
- A great way to get started flipping houses – especially if you have little money – is to form a joint venture with a partner who has money. If you don’t have the money, the joint venture partner will fund the deal while you do all the work. Although you may not get rich on your first deal, you’ll gain something even more valuable – experience.
What Makes a Good Real Estate Investment?
Finding an undervalued property in this market can be a challenge. With foreclosure rates down and bank owned property inventory drying up, there is a shortage of inventory compared to just a year ago. Utilizing real estate professionals will greatly assist you in finding suitable properties.
- Location. Expert flippers can’t stress this enough. Find a home in a desirable neighborhood, or in a city where people want to live. Start by researching local cities and neighborhoods. Look for areas with rising real estate sales, employment growth, and good schools.
- Sound Condition. You don’t want to tear the house down, and start rebuilding it from scratch. Look for structurally sound homes. You may not have the opportunity to have a home inspected, especially if you buy the home at a real estate auction. You need to learn what to look for, or bring someone knowledgeable about building, electric, and plumbing with you to look at the home, to determine if the home is structurally sound.
- The Right Fixes. A home with old carpet and wallpaper may be easy, and cheap, to update. Other home repairs to tackle might include, replacing outdated kitchen and bathrooms, and replacing windows and doors. A house that has mold, needs a roof replacement, or needs rewiring, requires some serious time and cash to update and sell. Make sure you know which updates and repairs you can afford to fix, which repairs you can’t afford, and which home improvements will increase the selling price of the house. When you estimate the cost of any job, experts advise that you add 20% to the final estimate. Why? It’s always going to cost more than you think it will.
- Value. Make sure the price of the home is below its value in the local market. Otherwise, you will not make money. The worst house in a great neighborhood has nowhere to go but up in value, due to the value of the other homes in the area. Know which home improvements increase the home’s value. Focus on these projects first. Home improvements that increase the value of a home might include upgrading kitchen appliances, repainting the home’s exteriors, installing additional closet storage space, upgrading the deck, replacing windows and doors.
- Before you make an offer, make sure you know the uppermost price you can pay for a house, and still make a profit. This includes your estimate for repairs, interest, and taxes. Remember to pad your estimate by 20%. If the homeowner or bank won’t sell to you for this price, walk away. It’s better to keep looking, than to risk going broke from a bad investment.
Now Get Working
- Make sure you know which home improvement projects you can complete quickly and successfully, and which projects will need contractors.
- You need permits before you start remodeling. Not having the right permits, or not correctly displaying permits, can cause serious delays, and fines, from city inspectors. Make sure to apply for permits as soon as the sale is final. It’s also helpful to make a timeline for projects, with associated deadlines, and the budget listed for each project. This helps you, and your contractors, get renovations done quickly, and within budget.
Relist and Sell
- Many flippers end up listing their homes with a Realtor. Realtors eat and sleep real estate, have access to buyers, and can list your house in the MLS database. They also know the current market fluctuations, and have the skills and network to get you the best price quickly.
Final Word
- Without a doubt, flipping homes offer great risks, and great rewards. A house flipper must be prepared for the possibility that the home won’t sell right away. House flippers also have to make tough decisions, like whether to accept an offer that is less than they wanted, but still for a profit. If you can handle all of the ups and downs, and you have the time and enthusiasm for fixing up and selling homes, then house flipping might be right for you.
Managing the post-storm insurance claims process
Florida, Georgia and North Carolina residents affected by Hurricane Matthew will begin surveying damages to their property and belongings.
Florida Chief Financial Officer Jeff Atwater and Insurance Commissioner David Altmaier put together the following tips to help Floridians begin the process of filing insurance claims for damaged property and belongings and this may prove useful to residents in other states as well:
Tip 1: Locate all applicable insurance policies. This may include a homeowners’ policy, flood policy (flood coverage is not covered under a typical homeowners’ policy and is separate coverage), and an automobile policy (may cover damage to your car from flooding).
Tip 2: Document all damaged property and belongings. Take photos or shoot video footage before attempting any temporary repairs. When you file an insurance claim, you may be asked for visual documentation of damages.
A photographic home inventory is a handy resource for this situation. A free smartphone app developed by the National Association of Insurance Commissioners called “MyHome Scr.APP.book” can help you take and store a room-by-room log of photos.
Tip 3: Contact your insurance company or insurance agent as soon as possible to report damages.Insurance policies require prompt reporting of claims, so it is important to act as soon as possible.
Tip 4: Cover damaged areas exposed to the elements to prevent further damage. Your insurance company may reimburse the expense of these temporary repairs, so keep all receipts.
Do not dispose of any damaged personal property until your insurance company adjuster has had an opportunity to survey it.
Florida consumers who have questions about their insurance coverage are encouraged to call CFO Atwater’s Department of Financial Services, Division of Consumer Services’ Insurance Helpline. Helpline experts can be reached by calling 1-877-MY-FL-CFO (1- 877-693-5236), or online at: myfloridacfo.com/hurricanematthew.
Prepare for Hurricane Matthew’s Aftermath
As Hurricane Matthew churns through the Atlantic with a possible landfall in Florida, the Property Casualty Insurers Association of America (PCI) urged property owners to take some basic precautions to protect themselves and their belongings.
“With the potential for Hurricane Matthew to hit somewhere along the East Coast, the Governor has issued a state of emergency for all 67 counties in Florida,” says Logan McFaddin, PCI Florida regional manager. “This caliber of a system could bring major flooding and damages along Florida’s East Coast.”
In addition to making sure residents have emergency kits and plans ready, PCI urges residents and business owners to take precautionary measures to prevent damage to vulnerable property. Flooding from storm surge during hurricanes and tropical storms can be especially dangerous for residents along the coast and further inland. PCI recommends that homeowners who sustain damage report it as early as possible to their insurance company.
McFaddin says flood insurance is advisable, but “there is typically a 30-day waiting period between the date of purchase and when flood coverage will go into effect.”
PCI hurricane precautions
Review your property insurance policy, especially the “declarations” page, and check whether your policy pays replacement costs or actual cash value for a covered loss.
Inventory household items, and photograph or videotape them for further documentation. Keep this information and insurance policies in a safe place.
Keep the name, address and claims-reporting telephone number of your insurer and agent in a safe and easily accessible place.
Protect your property by covering all windows with plywood or shutters, moving vehicles into the garage when possible, and placing grills and patio furniture indoors.
Keep all receipts for any repairs so your insurance company can reimburse you.
Check with your insurance adjuster for referrals to professional restoration, cleaning and salvage companies if additional assistance is needed.
Make sure watercraft are stored in a secure area, like a garage or covered boat dock. A typical homeowners policy will cover property damage in limited instances for small watercraft, and separate boat policies will provide broader, more extensive property and liability protection for larger, faster boat, yachts, jet skis and wave runners.
There will certainly be an extended period with power outages. After the storm, empty out your freezer and refrigerator of all perishable items and put in covered trash receptacles. Unplug all appliances and electronics since there will certainly be surges when power is restored.
Be mindful of downed power lines when going outside after the storm. Broken branches can also be dangerous and will continue to fall given the winds and rain that follow the storm. Remove debris from your property to ensure continued safety.
What a Home Buyer Should Never Say!
Always know who the real estate agent you are working with represents. If they are the Listing Agent they represent the Seller, a Transactional Agent works for their personal benefit and even though an agent will put you in the car and drive you around and are not the listing agent, in most states they are Sub-agents for the Seller and work for the seller. It is most advisable for buyers to only work with Exclusive Buyer Agents (EBAs). If you find that you are at an open house or have called an agent and they are not an EBA…you’re your tongue. What buyers may innocently say in the presence of a Seller, Listing Agent, Transactional Agent, or Seller’s Sub-agent can be used against them during a negotiation.
While it may be tempting for buyers to say what’s on their mind during their home search, you should consider yourself in a poker game and keep your cards close to your chest and your comments to yourself. There are some things home buyers should never say on the fly.
Others may be listening. Listing agents, seller and neighbors all have motives to keep tabs on the situation — or there could be even be a camera or recording device planted somewhere. In the age of smart home security you can never be too sure.
Those off-the-cuff comments made while moving from room to room could be used against you.
Here are some obvious comments home buyers should never say when shopping for a home:
‘I love it; it’s perfect!’
That feedback goes straight to the seller.
When the less-than-full-price offer comes in and the buyer requests all sorts of concessions, how will the seller be inclined to respond?
‘That (decor, furniture, wall color) is awful!’
What were they thinking?
So maybe the sellers’ tastes are not what the buyer would pick, but that doesn’t make their choices wrong. If these comments get back to the sellers, their desire to be cooperative when offer time comes in my be less than enthusiastic.
‘This home is way overpriced’
Be careful with that statement.
While this is a common buyer thought, what happens if this house ends up being the best option? When the listing agent or seller sees the buyer’s name on an offer, they immediately tart off in a defensive position. If is is truly overpriced your Exclusive Buyer Agent should provide a comprehensive analysis during the negotiation to make this point.
‘I can afford to spend up to X’
While it’s certainly a good idea for prospective buyers to find out just how much they can afford, they should keep that information strictly between them and their Exclusive Buyer Agent. You would be surprised by the number of deals that end of at the top of your affordability range because you disclosed this to the agent that is driving you around. Insist that they develop a Comparative Market Analysis and pay no more than market value for any property regardless if you can afford to pay more. Most real estate agents have a duty to get the highest price offer for the Seller or want to get the highest price offer to get the most commission. The only type of agent that has a fiduciary responsibility to the Buyer is an Exclusive Buyer Agent, even an Accredited Buyer Agent will either be a transactional agent or sub-agent of the Seller if they are not the listing agent as well.
“Why is the Seller moving?”
This is a personal question that’s best not asked by a buyer, it will more often then not result in an evasive answer or a lie.
Let the buyer’s agent position that query with the listing agent in a diplomatic way to glean information about the situation at hand.
‘What are the neighbors like?’
Talk about putting someone on the spot. Listing agents likely have no idea — they don’t live in the neighborhood 24/7, and it would they cannot discuss race, religion, sexual orientation, etc. When cornered, is the seller likely to divulge?
“There’s a Mrs. Kravitz across the street and a curmudgeon next door? And by the way, the teenager that lives on the other side of the house? His band starts warming up in the garage about 11 p.m. on Thursday nights.”Hardly. These people are trying to sell their house. It’s all wonderful. Buyers have to assess the neighbors on their own. Visit the neighborhood and different times of the day and on the weekends to get a sense of the neighborhood.
‘Will the seller take X price?’
Negotiations are best left to agents with a written document from which to work. No Agent or Seller will be inclined to negotiate in good faith without a written offer and Proof of Funds or a pre-qualification letter that demonstrates your ability to buy the property.
Although it’s OK to be candid with your own agent and those you trust, only do so when you are not within earshot of anyone in the seller’s camp. That includes those curbside chats as you are wrapping up the showing near your car.
Be engaged but conservative in the information you share and how you react to homes you see, even if you have a real interest. You can jump for joy when you are with your agent writing the perfect offer.
Mortgage Rates and The Fed
The Federal Reserve kept the benchmark rate unchanged on September 21st, in a divided vote that alludes to the possibility of a hike before the end of the year.
“The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives,” the Federal Open Market Committee (FOMC) released in statement. “The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”
“Our decision does not reflect a lack of confidence in the economy,” Fed Chair Janet Yellen said in a press conference, later adding, “We’re generally pleased with how the U.S. economy is doing.”Today’s action was largely expected by analysts as policymakers stood fast this summer, despite initially forecasting four hikes this year. The federal funds rate informs the trajectory of mortgage rates, which remain at historic lows.
Perhaps no sector has benefited more from ultra-low rates than housing, which was devastated by the real estate crash. Home sales are expected to total about 5.7 million this year, up from 5.4 million in 2014 and 4.6 million in 2011. The recovery can at least partly be traced to 30-year fixed mortgage rates that remain below 4%, down from about 6% in 2008, keeping borrowing costs low for buyers.
But today’s housing market is supported by far more than low mortgage rates — namely steady job and economic growth. What’s more, 30-year mortgages are priced off 10-year Treasury note yields, which do rise as short-term rates climb, but not as steeply.
Doug Duncan, chief economist of Fannie Mae, the giant government-sponsored funder of mortgages, expects this week’s Fed hike of a quarter of a percentage point to have virtually no immediate impact on Treasury or mortgage rates, noting markets already have priced in the move. Assuming the Fed raises its rate by a percentage point over the next year, Duncan expects 30-year mortgage rates to drift from 3.9% to 4.1% during the period. That would boost the monthly cost of a typical $225,000 mortgage by $26 to $1,454 — not enough to deter most buyers.
Adjustable-rate mortgages, many of which are modified annually, could increase about twice as rapidly, by about a half a percentage point. Yet as long as job growth and aggregate U.S. incomes increase proportionally, Duncan expects any market impact to be modest. A far bigger restraint on home sales, he says, is a limited supply that should push up prices by nearly 5% both this year and in 2016. As a result, Duncan expects home sales to increase 4% in 2016, down from 8% this year, with higher rates holding back 1% to 2% of deals.
“As long as the rate rise is gradual, I don’t see it as a hugely important factor,” he says.
Location, Location, Location!
There are many things that should be considered when buying a home. Since most home buyers expect to buy a bigger and better home someday in the future, resale value is an important factor in decision-making. While no one can guarantee that your home will grow in value, there are steps you can take that maximize your potential gain.
“Location, location, location,” is a common and almost overused phrase in real estate and has been in use at least since 1926, according to the New York Times. It is just as relevant now as it was then.
The idea is to buy a house that will appeal to the largest number of potential future home buyers. A careful choice of location can minimize potential negative influences on future resale value, and maximize positive influences.
So if “location, location, location” is so important, what makes a location good? Here are five characteristics to look for when buying a home. If you can get all five, chances are the home will be a good investment.
Some “good” and “bad” qualities simply vary by community. If you know your local community, you know which parts of town are less or more desirable.
Safety:
People want to live where there’s little or no crime. Naturally, they want to feel safe in their homes and will pay extra for it. A safe neighborhood means people will feel free to walk around, be outdoors and interact with their neighbors.
Good Schools:
Whether you have children, plan on having them, never want children, or they are out of the house; the better the school district, the higher the values of the surrounding homes can be. . The reputation, the quality and the district are additional factors in finding a good school. Homes surrounding good schools are in high demand. Found a home you love but the school district is subpar? Be aware of that issue for resale down the road.
Convenient access to work, popular places, shops and restaurants
Everyone wants to be near the best commercial districts. The closer to the hubbub of a particular town or the best parts of a city, the better the location – and the more someone is willing to pay for a home. The distance from point A to point B is so important. A long commute burns more gas and wastes more time than necessary. Therefore, evaluate the time it takes to travel from the home to the following: work, school, store, hospitals and favorite hangouts. Buyers without cars must live in communities with public transportation access. A community containing local amenities close by is valuable to buyers.
View, Views, Views:
No matter which town or city, someone will always pay for a great view or to be on or near the water. An interior location with lack of road noise is also an important consideration. If the community does not offer views, then the backyard area and how it is designed is a consideration.
Access to public transit and/or freeways:
In major cities, the farther you live from the bus, subway or other types of mass transit, the less valuable the home. A good location means being very close, and having easy access, to public transportation. Being near a train or bus can get you anywhere in a short amount of time. In some towns, where a commute by car is inevitable, easy access to the freeway makes for a good location. Adding 20 minutes to a commute just to get to the freeway never helps a location.
It’s almost easier to talk about what constitutes a bad location than to discuss good locations. There are some common characteristics that make a location “bad,” no matter where you are. That is because the qualities that make a good location desirable can vary, depending on whether you’re looking in the city, suburbs, the country or the mountains. Bad locations, by their general nature, are easier to pinpoint. Some examples are:
Commercial/industrial areas:
Unless you live downtown, commercial buildings on your block diminish residential real estate values. Part of the reason is because homeowners cannot control loitering. Homes next to gas stations or shopping centers are undesirable because of the noise factor and compromise safely.
Railroad tracks, freeways or under flight paths:
Some city dwellers have homes close to railroad tracks and endure rumbling and other noise 24-hours a day. If you have a choice to be in a quiet area, free from road noise within the same community, this is the better choice of residence.
Economically depressed areas:
If owners show no pride of ownership in maintaining their homes, evidenced by lack of maintenance, poor landscaping and junk in the yard, you might think twice about moving into such an area.
Close to hazards:
People don’t want to live next door to power plants or substations. Few home buyers want a transformer in their yard, either. Understand the flooding risks and exposure to natural disasters and the preventative measures that have been taken to minimize them.
Other factors that can make for a “bad” location: very close proximity to a fire station (good if your house is on fire, not so good if you’re trying to sleep); a hospital (frequent ambulance sirens); an airport (sounds of jet engines 18 hours per day) or a school (traffic from buses or parents dropping off children or kids yelling and playing).
Common Fees When Buying A Home
When buying a home, most people focus on how much the home costs and what interest rate they can get on the loan. While understanding the lending process is very important, the other fees that home buyers overlook when it comes to their home purchase.
There are some fees that will require up-front payment. Other fees may be rolled into the loan for your home. It’s important to understand the difference and know what you’ll be expected to pay.
Earnest Money Deposit
To prove you’re “earnest” in your purchase commitment, a buyer can expect to deposit to a trust account 1% to 2% of the total purchase price as an earnest money deposit within days of entering into a contract.This amount can change depending on market factors. If demand in your area is high, a seller could expect a larger deposit. If the market is cold, a seller could be happy with less than 1%.
Other governing factors like state limitations and rules can cap how much earnest money a seller can ask for.
Escrow account
An escrow account is basically a way for your mortgage company to make sure you have enough money to cover related taxes, insurance and possibly mortgage insurance. The amount you need to pay varies by location, lender, and loan type. It could cover costs for a few months to a year.
If you only provide a small down payment, you may be required to purchase private mortgage insurance. Private mortgage insurance, commonly referred to as PMI, is typically provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults.
Sometimes this means you are required to pay a full year’s worth at time of purchase, or it will be rolled into your monthly payment.
Escrow accounts are common for loans with less than a 20% down payment and mandatory for FHA loans, but it’s not required for VA loans.
Origination Fees & Points
The origination fee is the price you pay the loan officer or broker for completing the loan, and it includes underwriting, originating, and processing costs.
The origination fee is a small percentage of the total loan. A typical origination fee is about 1%, but it can vary. You should shop lenders for more than interest rate, but all of the fees associated with the loan.
Inspections
You want to be assured your new home is structurally sound and free of defects before you complete the purchase. Those assurances come with a price.
- Home inspection: This is critical for homebuyers. A good inspector will be able to notify you of structural problems, defective applianes, leaks, and other potentially serious problems. Expect to pay $300 to $800 for a home inspection, although cost varies by location and the size of the home and how many stories it is.
- Radon inspection: An EPA-recommended step, this inspection will determine whether your prospective home has elevated levels of the cancer-causing agent radon. A professional radon inspection can cost several hundred dollars.
- Pest inspections: Roaches are one thing. Termites or wood fungus are a whole different story. Expect to pay up to $150 for a Wood Destroying Organism inspection.
Attorney
Some states, such as North Carolina, require an attorney to be present at closing. In other states, such as Florida, this is optional. If you use a lawyer, expect to cover the costs, which vary by area and lawyer and what the attorney is being asked to do.
Credit check
Just because you can get your credit report for free doesn’t mean your lender can (and they will actually pull all three). You have to reimburse the lender, usually around for these reports that usually run about $30.
Insurance
If you live in a hazard-prone area, you might need to purchase extra insurance in addition to homeowners insurance, these can include wind and flood. Lenders will require that you purchase the required insurance to protect their investment. If you are a cash buyer, you have the option of buying insurance or self-insuring. Make sure you understand the risks.
Appraisal
Your lender will not approve a loan for a home without knowing what its fair market value is. They will determine this value based on an appraisal. Appraisal costs vary by market area and the size and complexity of the property. An appraisal will typically cost $250 to $1000.
Title Insurance
Title insurance covers you in the unlikely case that the person who sold you the house didn’t actually own it or if information on the title was false. Typically this is verified before the purchase of your home, but this insurance protects the lender or the buyer against loss arising from disputes over ownership of a property.
The lender will require you to have title insurance for the value of the loan. You are also required to have title insurance on the value of the property. Whether the buyer or seller pays for this is area specific and is a protocol not a mandate and can be negotiated as a condition of the contract.
Survey
A survey is not required in all instances, but your lender may require a professional surveyor to determine exactly where your property lines are drawn. Your attorney will also review the survey to ensure that there are no encroachments. Prices vary widely, but expect to pay at least $100.
Document preparation fees:
The lender, broker, Title Company or closing attorney will usually have a fee to cover the preparation of the required documents for the loan and closing paperwork. These fees are typically rolled in closing costs for the home and may be covered by either the homebuyer or seller.
State Recording Fees:
Depending on where you live, there may be a fee required for recording and holding the information regarding the sale.
Kim N. Bregman